"Your margin is my opportunity," Amazon (AMZN 4.44%) CEO Jeff Bezos once famously said.
Bezos was talking about the markups that fueled Amazon's rivals -- to their detriment. Amazon foes and their allegiance to trendy performance metrics led them to make short-term decisions that neglected the long-term opportunities.
As investors, we often make the mistake of viewing the market the way Amazon's competitors do. We follow what's fashionable now instead of what will trend in the future. Sector rotation is part of this herd mentality, and we're seeing it happen now as the market stampedes out of "stay-at-home" stocks following encouraging vaccine news.
Some of the selling makes sense, but it's nearsighted to assume that all stay-at-home names will suffer when the pandemic fades in the rearview mirror. Some companies that have been shooting higher through the first nine months of 2020 -- and sliding in November -- will be in much better shape at the other end of the COVID-19 crisis. I would like to coin a new phrase, even if all I'm doing is adding two letters to Bezos' second word and jumbling them around: Your migraine is my opportunity.
Don't throw the hot stocks out with the cold water
Zoom Video Communications (ZM 1.77%), DocuSign (DOCU 3.11%), and Amazon itself have thrived in the new normal. Zoom became the platform of choice for companies meeting remotely, virtual learning, and online social gatherings. DocuSign stepped up its game when wet signatures were no longer feasible. Amazon was already a rock star, but it became that much more convincing to shop for groceries, board games, and other essentials from the safety of home as social distancing measures were introduced.
Amazon only dipped slightly as investors rotated out of stay-at-home winners, but Zoom and DocuSign joined the dozens of once-soaring stocks suffering double-digit percentage hits on the vaccine news. The sell-off was overdone for most -- but not all -- of these names.
Even when we go back to the office or classroom, do you really think this is the end of virtual methods? Are you going to want to drive over to a bank branch or legal office the next time you need a document signed?
This rule doesn't apply to all of the stay-at-home winners that are now sinkers, but it's easy to put each investment to the 2022 test. Look out two years to when the pandemic will be a thing of the past. It may happen next year, of course, but let's take a longer view.
Will movie theaters be back in 2022 to where they were in 2019? Of course not. The pandemic has accelerated the shift to digital delivery, and streaming services will be in better shape than they are now. We'll go back to concerts, sporting events, and theme parks, but I wouldn't put a lot of faith in multiplex operators that were soaring earlier this month.
Will our appetite be the same for furniture, home fixtures, and extending our outdoor living space in 2022? It's fair to say that we won't be as bent on sprucing up our digs as we are right now when we're spending a lot of time at home. In two years, you'll probably already have updated your home, won't be likely to revisit the subject.
Finding growth stocks now is easy. The real advantage is identifying the ones that will keep growing in the future.
The moral of the story is simple. Invest in disruptors. Zoom, DocuSign, and Amazon are disruptors. The pandemic accelerated the trends they were championing, and there's no going back. Corporate meetings, in-person John Hancocks, and heading to the mall on Black Friday were chores before, and you're not going back now. The old way proved to be a headache -- a migraine, if you will -- and that's the ultimate opportunity for Zoom, DocuSign, and Amazon.
Your migraine is my opportunity. Thanks, Bezos.